Speaking in the House of Commons, Bishop Auckland MP, Helen Goodman, suggested that the Government faced a second hole in its Budget plans, because Chancellor George Osborne had announced a series of cuts to business rates which included taking 600,000 small businesses out of paying business rates entirely.

"None of this would be possible if it wasn't for the actions of this government and the work of the chancellor in turning our economy around", Cameron said.

"Our nation can either decide to be true to our history - and remain outward-looking internationalists on the world stage - or shrink to lower prominence", Major wrote in the Sunday Telegraph.

Earlier however Downing Street disclosed that Mr Osborne would not now be bringing forward alternative measures to meet the shortfall left by the cancellation of the cuts to PIPs until the Autumn Statement at the end of the year.

Another Duncan Smith ally, senior Eurosceptic Bernard Jenkin, complained of high-handed leadership by Cameron, telling Sky News that "the prime minister...is not meant to be a dictator".

"We are sorry to see Iain Duncan Smith go, but we are a One Nation government determined to continue helping everyone in our society have more security and opportunity, including the most disadvantaged", the government said in a statement.

Prime Minister David Cameron and Chancellor of the Exchequer George Osborne face the biggest challenge to their authority in six years of power as the Conservative Party descends into civil war over the resignation of Iain Duncan Smith.

The government announced it was abandoning the contentious cuts to disability benefits, worth 4.4 billion pounds, and said it did not intend to make any further cuts to the welfare budget.

Mr Watson, Labor MP for West Bromwich East and Labour's Deputy Leader, said it was now clear that the Government had targeted disabled people because they were less likely to vote Conservative.

Spending on Personal Independence Payments (PIPs) was up by £3bn since 2010, he said, adding that the Budget "closes the gap between rich and poor and North and South".

His successor Stephen Crabb is due to tell MPs later that controversial moves to curb the Personal Independence Payment (PIP), which would have affected 640,000 disabled people, will be ditched.

In his resignation letter on Friday, Duncan Smith questioned whether Cameron was honoring his slogan that Britons were "all in this together", despite deep austerity cuts including $1.4bn axed from annual disability welfare.

Mr Osborne should explain why "for the first time in my memory in Parliament, a Government's budget has fallen apart within two days of its delivery".

Dr. Wollaston told the BBC Radio 4 Today program: "The point that Iain Duncan Smith was making was that there are some groups at the moment that can't be touched".

Other Tory backbenchers sent messages of support to Duncan Smith, with some launching their own attacks on Cameron and Osborne.

The last straw appears to have been a proposal to further cut disability benefits.

The sudden departure of Duncan Smith not only widened divisions in the ruling party, split over whether to stay in the European Union, but also prompted calls from the opposition Labor Party for Osborne to step down.